Itaú BBA - ARGENTINA – Output Rebounded in Early 2Q19

Macro Latam

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ARGENTINA – Output Rebounded in Early 2Q19

junio 26, 2019

We note that the risks to our GDP growth forecast for the year (-1.4%) are still tilted to the downside

Activity posted a sequential gain in April. The EMAE (official monthly GDP proxy) posted a 0.8% mom/sa increase from March, although this still left quarter-over-quarter growth in negative territory (-0.3% annualized). Year over year, activity fell by 1.3% in April, beating the Bloomberg market consensus and our expectations (-2.9% and -3.5% yoy, respectively).

Primary activities were the only sector to post year-over-year growth in the quarter ended in April. Normalization of the soy harvest drove the agriculture, mining and fishing sectors up by 15.2% yoy (from 4.6% in 1Q19). Manufacturing fell 10.0%, compared with -10.8% in the previous quarter. Construction declined by 4.9% (from -6.8% in 1Q19), while services contracted by 4.3% yoy (down from -4.0% yoy in the quarter ended in March), still suffering from the decline in real wages and high interest rates. 

Our seasonal adjustment shows gains in most sectors. Primary activities climbed 12.8% qoq/saar, similar to the 11.1% posted in 1Q19. Construction also grew by 18.6% qoq/saar, up from the 8.6%. Manufacturing increased by 9.5% qoq/saar (from 7.6%). Finally, services continued on a downward trend, at -4.5% qoq/saar, following the 2.3% contraction posted in 1Q19. 

We recently adjusted our GDP forecasts down to -1.4%, on expectations for weaker global growth, despite an anticipated sequential recovery in 2Q19 led by a good harvest. We note that the risks are still tilted to the downside, given ongoing adjustments and uncertainties regarding the outcome of the upcoming presidential election.

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